And so “pipeline politics” became a modern-day version of the nineteenth century’s Great Game, in which Britain and Russia had employed cunning and bluff to gain supremacy over the lands of the Caucasus and Central Asia. This book is the story of how, at the dawn of the twenty-first century, the game was played once again across the harsh environs of the Caspian Sea.
CHRONOLOGY
* * *
Pre-Soviet period
1823
Zeynalabdin Tagiyev born
1872
Sale of Baku land legalized; oil rush begins
1873
Robert Nobel arrives in Baku
1878
Ludvig Nobel unveils Zoroaster, world’s first oil tanker
1883
Edmond and Alphonse de Rothschild arrive in Batumi
1901
Baku supplies 51 percent of world’s oil
1905
Worker uprising destroys Baku oil fields
1906
Baku-Batumi oil pipeline completed
1914
World War I breaks out
1917
Bolshevik Revolution
1920
Bolsheviks overthrow Azerbaijan government (April 28)
Early Soviet period
1920
Standard Oil concludes deal with Nobels (July 30)
1921
Lenin’s “New Economic Policy” invites foreign businesses
1924
Britain recognizes Soviet Union
Lenin dies
1933
United States recognizes the Soviet Union
Later Soviet period
1968
James Giffen hired by Soviet trader Ara Oztemel
1969
Détente begins; Nixon liberalizes trade with Soviets
1972
Oztemel fires Giffen
1973
John Deuss launches first oil trading venture
U.S.

Jaz’s property, in a district called Balakhani, was absorbed into the Persian Empire, then in 1813 into Russia. On the other side of the world, America had yet to develop a commercially exploitable oil industry. But that was about to change, sending shock waves all the way to Russia and, finally, to Baku. In 1859, a tenacious entrepreneur named Edwin Drake struck a gusher after twenty months of toil in the poor western Pennsylvania town of Titusville. With it, he triggered the world’s first oil rush. In the wake of that discovery, a stern and lanky Clevelander named John D. Rockefeller cornered both the U.S. and European markets, earning him history’s first great oil fortune.
By the late 1860s, Rockefeller-led advances were revolutionizing the oil business, but production methods at Mr. Jaz’s property were substantially unchanged. The latest tenant on this land lacked almost any justification to invest in the new steam-driven wells because unlike his Pennsylvania counterparts, he couldn’t be sure he would be the one to profit.

Instead of seeing the melting as a grave warning to humanity, they are eyeing the previously inaccessible oil beneath the seabed at the top of the world. They’re exploiting the disappearance of the ice to drill for the very same fuel that caused the melting in the first place. That’s why, in summer 2013, thirty men and women from eighteen countries sailed for a Russian Arctic oil platform, determined to focus global attention on the new Arctic oil rush. They saw how fossil fuels have come to dominate our lives on Earth, how the energy giants bestride our planet unchecked. They knew that at some time and in some place somebody had to say, ‘No more.’ For those activists that time was now and that place was the Arctic. Their ship was seized, they were thrown in jail and faced fifteen years in prison. Millions of people from across the world raised their voices in support of the stand they took, including many from the great nation of Russia.

…

It’s owned and operated by Gazprom, Russia’s state-owned energy giant. Sometime in the next few weeks Gazprom will try to become the first company in history to pump oil from the icy waters of the Arctic. Until now the thick sea ice has made drilling here almost impossible, but as temperatures rise the oil companies are moving north, and if the Prirazlomnaya succeeds it will spark a new Arctic oil rush. That’s why the Sunrise is here. That’s why, right now, across this ship, thirty men and women are making final preparations to scale that platform and shut it down.
Frank leans over the bow and sees his reflection in the water. He breathes deeply and looks up. The last of the sun is sinking below the horizon. When it next appears, he’ll give the order to go.
TWO
The portholes are screwed shut.

…

Activists had confronted BP’s Northstar drilling operations in Alaska; Greenpeace ships had documented climate change impacts off Greenland and Svalbard; and Mads Christensen’s team in Scandinavia had campaigned against the industrial fishing fleets taking their destructive methods to the Arctic.
But it was Deepwater Horizon that provided the spark for a new wave of action. With the world’s oil giants moving into the melting waters above the Arctic Circle, Sauven got his way and the Greenpeace ship Esperanza sailed north to confront the new Arctic oil rush.
That summer Greenpeace played a cat-and-mouse game with the Danish navy – still the governing power in Greenland. The activists outpaced the Danish special forces RHIBs and occupied the underside of the Cairn platform, forcing a temporary shutdown.
The following year Greenpeace returned to Greenland, this time with Frank Hewetson leading the logistics operation. He hung a pod and two occupants from another Cairn oil platform, halting exploratory drilling operations for two days.

The bitumen, a
rather thick, gooey substance, is processed to make it more viscous so
that it can be refined and turned into a liquid for use in our cars.
The extra processes required to extract and refine tar sand compared with conventional oil add significantly to its cost. Only in recent years has it been economic to commercially exploit the deposits
of tar and oil sands, found mainly in Canada and Venezuela. The
rise in Canadian petroleum production from oil sands has created an
oil rush in the state of Alberta, which has become the Saudi Arabia
of unconventional oil, and tar sands provide a new source of supply
for American drivers. The US imports more oil from Canada than
any other country. Given their political and geographical proximity,
this is probably as close as the US may get to energy independence.
Canadian oil sands production is estimated to account for most of
the net increase in oil production from countries outside of the Opec
grouping.

…

Amalgamated floated in 1889, bought fellow copper producer
Anaconda (Schmitz, 1986), and in the same year attempted to corner
the copper market by holding back shipments to Europe. This pushed
prices higher, which stimulated supplies from other sources. Amalgamated was left holding very large stocks at a time of rapidly plunging
prices (Gibson-Jarvie, 1976).
The Rothschild bank – which had historically been involved in the
gold trade, and which was a financier to the oil rush in the Caspian Sea
in the late 19th century, and the diamond trade through its interests
in De Beers – was also interested in copper during this period; it was
financier to the Secretan scheme at a time when it was a key shareholder in Rio Tinto, and also to Anaconda. This combined interest
gave the Rothschilds ‘real power’ in the world copper market in the
late 19th century (Ferguson, 1998).24
A second copper producer scheme was set up – the Copper Producers’ Association – which attempted to peg price and limit production when market demand weakened.

Royalty payments to the government
for mining concessions jumped from $37.5 million in
2002 to nearly $110 million one year later, despite only
a modest increase in the value of the diamonds extracted. Overall, the Angolan economy has taken
off since the war’s end, with income per capita rising
by more than 20 percent between 2003 and 2005—
proving once again that the poorest economies can
quickly rebound from war. If the old diamond companies are suffering, the rest of the country isn’t.
In the oil rush that has seized much of Africa in
recent years, we may be witnessing another disconnect
184
TH E RO A D BA CK F RO M WAR
between economic prosperity and business profits. Some
Western oil companies, whether inhibited by ethics or
constrained by law, have shied away from working with
the most unsavory African dictators. But such qualms
haven’t stopped the China National Petroleum Company (CNPC) from drilling in countries like Chad and
Sudan.

During one early stint at a BP reﬁnery,
Browne was doused with crude oil as an initiation rite.3 Had he
come out as gay, especially as a young man, he almost certainly
wouldn’t have risen to lead BP. “You had to remove yourself
from conversations, from play acting, from the macho talk. You
became very good at avoidance.”4 Nevertheless, Browne pursued his career plans, joining BP full-time after graduating from
Cambridge. He was posted to Alaska. Anchorage in the late
1960s was an oil boomtown, not unlike those that had populated Texas in the early days of its oil rush. Browne arrived at his
hotel on his ﬁrst day in town to ﬁnd that “the noisy smoke-ﬁlled
bar was crammed with burly, beer-swilling men, with ‘working’ women loitering at the entrance.”5 Like most boomtowns,
it was rowdy and crawling with opportunists looking to make a
fast buck. Oilﬁeld work was hard in the best of conditions, but
in the frozen climes of Alaska, companies had to pay top dollar to get even unskilled labor to the job site.

A sign once pointed tourists to a viewpoint from which they could peer into Spindletop and see, distantly, the actual site of the Lucas Gusher. But a hurricane blew the sign down, and it has not been replaced. To people driving past, Spindletop is a void space, a low mile of trees by the highway that goes unremarked, even in the area whose prosperity it once sparked.
But however invisible, the wedge of land between Sulphur Drive and West Port Arthur Road holds a secret. And the secret is this: the oil rush on Spindletop is not over. Not quite.
Steven Radley is the last man standing. More than a hundred years and 150 million barrels of oil after Patillo Higgins’s hunch first came good—and a half century after the major producers left this land for dead—he is doing his damndest to squeeze every last cup of petroleum out of its stubborn soil.
We met up by a set of large, squat oil tanks that hunkered in the predawn darkness.

In many ways, the disaster in the Gulf was remarkably visible (although a quickly imposed ruling barred anyone from going within sixty-five feet of any response vessels or booms on the water or beaches, under threat of civil penalty of up to forty thousand dollars and a Class D felony punishable by up to fifteen years in jail). It was a media event for the new age: thousands of us sat glued to streaming footage of the oil rushing from its source; we forwarded videos of the burning rig, black smoke choking the sky; Stephen Colbert’s pithy comment—“In honor of oil-soaked birds, ‘tweets’ are now ‘gurgles’ ”—became the most retweeted of the year.
But sitting in the boat, I realized just how profoundly the decks were stacked against independent truth tellers—and not only because we were self-financed and especially vulnerable to bullying regulations.

Now he had done the same for Venezuela.[5]
The La Rosa strike confirmed that Venezuela could be a world-class producer. The discovery inaugurated a great oil frenzy. Over a hundred groups, mostly American, but some British, were soon active in the country. They extended from the largest companies down to independent oil men like William F. Buckley, who obtained a concession to build an oil port. The oil rush provided enormous opportunity for General Gomez to enrich himself. His family and cronies, the Gomecistas, would, infallibly, obtain choice concessions from the government and then resell them, at considerable profit, to the various foreign companies, passing on kickbacks to the general himself. Later, to formalize such matters, the general and his friends set up a paper outfit called Compania-Venezolana de Petroleo, but more familiarly known as "General Gomez's company."

…

As late as 1990, at age ninety-two, Hammer was still the active chairman of Occidental, and loyal stockholders continued to sing his praises. He was indeed in the line of the great buccaneer- creators of oil: Rockefeller, Samuel and Deterding, Gulbenkian, Getty and Mattei. He was also an anachronism, a privateer from the past, in spirit a "merchant from Odessa" circling the globe in his corporate jet in search of the next great deal. But it was a deal in Libya that had made possible his global tycoonery.[6]
The mad Libyan oil rush was already well along when, in 1965, Occidental won concessions there in the second round of bidding. Oxy's thick bid stood out midst the 119 others because it had been done up, under Hammer's personal supervision, on sheepskin manuscripts and was wrapped in red, black, and green ribbons—the colors of the Libyan flag. As one sweetener, Oxy promised to establish an agricultural experimental farm at a desert oasis that had been the childhood home of King Idris and the burial spot of his father.

…

Some months later, a senior Phillips executive was excitedly asked at a technical meeting in London what methods Phillips had used to diagnose the geology of the field.
"Luck," he replied.
Toward the end of 1970, British Petroleum announced the discovery of oil in the Forties field, on the British side, one hundred miles northwest of Ekofisk. It was a huge reservoir. A series of major strikes followed in 1971, including Shell and Exxon's discovery of the huge Brent field. The North Sea oil rush was on. The 1973 oil crisis turned the rush into a roar.
Fortunately, a new generation of technology was either available or under development that would allow production to proceed in the North Sea, a province of the sort that the industry had never before attempted. The whole venture was risky and dangerous—physically and economically. Drilling rigs had to be able to work through water depths much greater than anything tried heretofore, and then still drill another four miles under the seabed.

"Should we pack it all back up?"
Jaidee grimaces, finally shakes his head. "No. Burn it."
"I'm sorry?"
"Burn it. We both know what is happening here. Give the farang something to claim against their insurance companies. Let them know that their activity is not free." Jaidee grins. "Burn it all. Every last crate."
And for the second time that night, as shipping crates crackle with fire and WeatherAll oils rush and ignite and kick sparks into the air like prayers going up to heaven, Jaidee has the satisfaction of seeing Kanya smile again.
* * *
It is nearly morning by the time Jaidee returns home. The ji ji ji of jingjok lizards punctuates the creak of cicadas and the high whine of mosquitoes. He slips off his shoes and climbs the steps, teak creaking under his feet as he steals into his stilt-house, feeling the smooth wood under his soles, soft and polished against his skin.

The rest of Britain has been dying to get the “ABERDEEN GOES BUST” story. The danger is that if people think it is the end of the road, they will invest elsewhere. It is still a strong and diverse economy, and we must start paying more attention to the traditional side of things.’
Such men argued that Aberdeen had been inaccurately characterized as a former one-horse town that had enjoyed a few mad oil-rush years, and was about to revert to its primitive, dozy previous existence. In the early days of the boom, Americans would ask before they arrived whether the streets were paved, and some newcomers had been amazed to find a solid city, rather than a picturesque outpost of scattered crofts. ‘We weren’t going around in bare feet and kilts,’ said one businessman. An accountant delighted in taking visiting Americans to the university and showing them an archway inscribed with the date 1494, which was only two years after Columbus discovered America.

For one thing, they had done a good job of acquiring acreage, such as in the Sholem Alechem oil field in southern Oklahoma, a productive field with an odd name and a colorful history. Some locals believed it was named after a Native American expression. It’s more likely that it was a tribute to Bill Krohn, a popular and outgoing reporter for the Daily Ardmoreite in the city of Ardmore.
Krohn had been an indefatigable journalist who traveled to oil fields to visit workers, breaking news on new oil discoveries and chronicling the 1920s oil rush. When he saw a roughneck, he’d call out the traditional Jewish greeting of “shalom aleichem,” or “peace be unto you.” Krohn became a well-liked figure, and his greeting caught on. He even popularized the traditional Jewish response to this greeting: “aleichem shalom,” or “unto you, peace.”
When a newcomer heard the odd phrase and gave Krohn a look of confusion, the reporter would buy the fellow a raspberry soda at a nearby confectionery store and explain it all to him.

But China’s currency liberalization will make preventing Chinese money from flowing out of the country harder, and the Chinese passport now gets red-carpet treatment: Red is the new green.
OIL AND WATER ACROSS THE WORLD’S LONGEST BORDER
For centuries, natural resource supplies have lured waves of economic migrants seeking work and fortune. Today, Fort McMurray in Alberta, Canada, is one of those towns to which migrants have flocked in search of North America’s new “oil rush” riches. Canada only seriously tapped its oil sands (a patch larger than England) after the OPEC embargo of 1973. Suddenly Fort McMurray found itself properly incorporated as a city for the first time, and its population more than tripled to thirty thousand by 1980. In just the past ten years, the population has shot up again to eighty thousand.
But that’s just the official population. The world of transient mobile laborers normally associated with Filipinos or Pakistanis in Dubai has come to Fort McMurray, where outside the city perimeter, on land owned and operated by oil companies, fifty thousand live in trailers and work tedious shifts as “rig pigs,” electricians, truckers, cafeteria servers, bartenders, prostitutes, and any other chore needed to keep energy levels high and oil pumping—even during the frigid winters.*8 The falling oil price has slowed Fort McMurray’s momentum but not its trajectory.

The money that poured into Silicon Valley start-ups in the late 1990s was also a good investment binge, since it left behind productive companies like Google, but its unraveling led in the short term to the 2001 recession.
Now, as oil prices collapse, U.S. energy investments are plummeting, drilling rigs have been silenced from Texas to North Dakota, shale jobs are drying up, and shale boomtowns are turning into ghost towns. Though this oil rush leaves behind a productive new industry, a plus in the long run as it will likely keep a lid on U.S. energy prices, it poses a near-term risk because energy investment was such an important driver of U.S. growth in recent years, and that boost is now largely gone.
The United States has also lost its advantage on the currency rule, which says that cheap is good. Until 2014 the United States was on the right course, with a cheap dollar making exports more competitive while discouraging spending on imports, and forcing the country to live within its means.

The most daunting challenge in reforming
globalization is to make it more democratic; a test of success will be in
how well it succeeds in ensuring that these broader values triumph
more often over simple corporate interests.
CHAPTER 5
Lifting the Resource Curse
t the turn of the twentieth century, czarist-ruled Azerbaijan
was the world's biggest exporter of oil, and its largest city,
Baku, on the shores of the Caspian Sea, was like the Wild
West. People flooded in from all parts of Russia, intent on making
money in the oil rush. Jews, Turkomans, Kazakhs, and assorted Europeans
joined the fray. Real estate prices soared as the new arrivals competed for
space. Oil rigs and refineries dotted the city. Alfred Nobel worked
here for a while, and the park he built still remains. In the course
of the century, Azerbaijan's oil made many people rich, yet much
of the nation remained very poor. Today, Baku is littered with
rusting old factories and equipment in what was known as the "black
town," the grimy industrial area on the outskirts of the "white city,"
where oil millionaires once built vast houses and a boardwalk by the
Caspian.'

pages: 436words: 114,278

Crude Volatility: The History and the Future of Boom-Bust Oil Prices
by
Robert McNally

Like Don Benito Wilson before him, Doheny hoped that the tarry stuff, which most still thought a useless nuisance, signaled the presence of oil, and with $400 that Canfield borrowed, leased the oozing parcel of land. Within months, they’d drilled the first successful oil well in L.A., and with the money it produced plus backing from banker Isaias Hellman, among others, began leasing every promising property they could find. An unprecedented oil rush followed. It had taken thirty-five years, but Wilson’s dream of a west coast oil boom had finally come true. As railroads switched from coal to oil power and the internal combustion engine set loose the automobile, oil became one of the Southland’s leading industries.
In the years that followed, Canfield and Doheny expanded their empires, together and separately, leasing land and drilling wells all over the region.

Yet it did not stand still either. After 1848 a wider railway network was built; export businesses increased, especially of timber, paper, sugar and tobacco; and several mechanized industries were launched.
Oil, however, supplied the only resource to promise industrial development of more than provincial importance. Discovered in the 1850s in the district of Borysław-Drohobycz, it grew explosively into a wild oil-rush area of near-unregulated drilling and exploration. Foreign investment, mainly French and German, poured in. Borysław and nearby Tustanowice saw hundreds of oil shafts spring up in the muddy fields alongside the district’s only paved road, and 100 trains a day left the state refinery at Drohobycz. In 1908 the Galician oilfield claimed to be the third largest in the world after those of Texas and Persia.18
Even so, the deep-seated problems of Galicia’s rural economy deteriorated.

Destler, Chester McArthur. Henry Demarest Lloyd and the Empire of Reform. Philadelphia: University of Pennsylvania Press, 1963.
———. Roger Sherman and the Independent Oil Men. Ithaca, N.Y.: Cornell University Press, 1967.
Diggins, John Patrick. Max Weber: Politics and the Spirit of Tragedy. New York: Basic Books, 1996.
Dolson, Hildegarde. The Great Oildorado: The Gaudy and Turbulent Years of the First Oil Rush: Pennsylvania, 1859–1880. New York: Random House, 1959.
Dreiser, Theodore. The Financier. Reprint. New York: Penguin, 1981 [1912].
Du Bois, W.E.B. The Autobiography of W.E.B. Du Bois: A Soliloquy on Viewing My Life from the Last Decade of Its First Century. New York: International Publishers, 1968.
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